Which of the following is a potential monetary policy instrument for the Fed?

Question

Quizplus · Accepted Answer

The federal funds rate is a potential monetary policy instrument for the Fed. It is the interest rate at which depository institutions lend reserve balances to other depository institutions overnight on an uncollateralized basis. This rate directly impacts short-term interest rates throughout the economy and is thus a critical tool for influencing the overall money supply and inflation rate. The other choices listed (income tax rates, profit rates, induced tax rates) are not monetary policy instruments controlled by the Fed.

Which of the Following Is a Potential Monetary Policy Instrument